If anyone in the channel had doubts that the market for email, Voice over IP (VoIP) and other communications products was changing radically, the statement of purpose Microsoft Corp. made today should eliminate them.

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Microsoft is not only building VoIP functionality into its own software, it expects to be able to unseat even many IP-based PBXs as the central point of unified communications networks, according to Jeff Raikes, president of Microsoft's business division, who described Microsoft's ambitions in a keynote today at VoiceCon Spring 2007 in Orlando.

Raikes announced the start of a public beta of Office Communications Server 2007 -- the company's VoIP and UC server -- and Office Communicator 2007, the client version.

Over the next three years, the cost of the average VoIP system will drop by half, Raikes said, as companies shift to IP-based multimodal communications based on the email, voice, video and instant messaging functions in Microsoft products.

Under the agreement, Cisco will integrate its Unified Communications Manager with Microsoft's Office Communicator to add network-centric video and voice capabilities to Office Communicator (OC). They will also will connect the Cisco Unity and Unified MeetingPlace UC products -- which are designed to link videoconferencing, voice and other internal communications mechanisms into a single system -- with instant messaging and email from Microsoft Live Communications Server, OC and Exchange 2007.

The news of the integration and the intention of both companies to push forward on unified communications are good for both customers and the channel because they take steps to repair communications mechanisms that are "broken," according to Zeus Karravala, analyst at the Yankee Group.

"We have to communicate through too many pieces in too many different ways," Kerravala said. "Each method is separate from everything else we do. The direction Microsoft is taking -- where communications are embedded in everything else -- is the right one and the rest of the industry will be following."

But it won't be a painless trip, especially for VARs that have invested time, training and money in a certain vendor or a certain approach to unified communications. Cisco became a force in VoIP by offering a product that brought network managers into a buying discussion that had included only telecom managers, Kerravala said. Microsoft is expanding the population of UC decision makers by bringing in Exchange administrators and other application specialists.

That fundamentally changes the way communications products are presented, sold and integrated, taking much of the advantage away from the telecom or networking specialists and pushing it toward those who specialize in application integration.

"It's going to be a raging war in the IP telephony market," said to Matt Briggs, partner and director of sales for Single Path, a VoIP/Unified Communications specialist Cisco named its Midwestern Regional SMB Partner of the year for 2006.

The competitive landscape is already changing, though early indications are visible only to the people actually making the deals.

"Right now there's the ability for Cisco and Microsoft to integrate and play nice," Briggs said. "The Microsoft box has a light communications server, but the next version will be the one with call control. When call control fits in some of the Microsoft servers, that will absolutely be competition for Cisco."

"Microsoft's name is strong enough to make people talk, but the quality of service isn't there to make Microsoft a player in the voice market today," Holt said. "They announced [Microsoft's intention to add voice functions] years ago, so it's taking a while to get out; I don't expect it to change anything soon."

"Voice requires the network and Cisco has the network; Microsoft just isn't able to manage that right now," Holt said.

"Here's the difference," Kerravala said. "With Cisco, Unified Communications is a product. Microsoft is taking that functionality and spreading it across everything they do. It's the same thing they did spreading Web functionality, after Netscape invented the browser market."

Kerravala has been arguing the point almost since Microsoft announced its partnership with Nortel and its intention to build voice communications into its own products.

Cisco, Nortel and the others will still have a tremendous advantage because they're able to control the network from end to end, and have already built in quality of service and other features that can keep performance-sensitive applications like VoIP running at an acceptable level, Kerravala concedes.

Plus, the Microsoft products are still in beta and "I'm amazed that people seem to be giving Microsoft a free pass on the quality thing," Kerravala said. "Microsoft has not released anything to show their call quality will be what it needs to be. Of course, you can ask 'will it have the same richness' as Cisco's UC, but how much richness do you need?"

But the whole UC consolidation -- and what vendors or VARs survive the transition to it -- comes down to more than just whether voice functions reside in the network or the applications, Briggs said. UC is a reflection of the changing way people within corporations communicate, especially the younger workers that often drive technological change.

"The way the younger generation communicates is a lot different than the way we do it," Briggs said. "They're used to jumping on YouTube, BoingBoing, MySpace, six different IM windows -- they live in front of their PCs. The culture is shifting and you have to commend Cisco for looking out a ways to see how their targeted markets are moving forward."

Aside from the cool quotient, social networking can make companies more efficient in the same way email, groupware and other communications applications did -- by making it easier to distribute information as a podcast, group chat or IM, blog or other mechanism in the same way MySpace or YouTube users have done, Kerravala said.

"That's one of the reasons Microsoft might start taking more share than people might think," Kerravala said. "Innovation starts with the consumer vendors like LG or Nokia, and consumers take it into the enterprise, and businesses ask their vendors for that function.

"If you're talking to an IT manager who fundamentally wants to keep consumer technology out of the enterprise, you're staying two years away from the source of true innovation," Kerravala said.

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